Acme United Reports Solid First Quarter and Promising Outlook for 2024

Acme United (US: ACU – $41.10), reached net sales of $45.0 million for the quarter ended March 31, 2024, compared with $45.8 million in the same quarter last year. This represents a 2% decrease, reflecting the sale of the Camillus and Cuda hunting and fishing product lines in November 2023 for $19.6 million.

Camillus and Cuda combined, achieved annual sales of approximately $12 million. So when leaving out these product lines from the equation, sales in Q1 2024 actually increased 1% compared to the first quarter of 2023. Moreover, due to the long Easter weekend late March, the Company wasn’t able to ship $2 million worth of product, which would otherwise have been added to the first quarter sales. These sales will obviously now be booked in the current quarter.

Despite sales being more or less even, earnings soared to $1.6 million, or $0.39 per diluted share, for the quarter ended March 31, 2024, compared to $1.0 million, or $0.28 per diluted share, for the comparable period last year. This is an increase of 65% in net income and 39% in diluted earnings per share.

The Chairman and CEO of Acme United, Walter C. Johnsen said, “Acme United had very strong earnings in the first quarter due to productivity improvements in manufacturing and distribution. We also experienced reduced inbound shipping costs and lowered our selling and general expenses.”

Mr. Johnsen added, “These initiatives include additional distribution of first aid kits and components in the hardware and drug store markets, new craft and cutting tool planograms in the mass market, additional sales of spill clean-up products to large mass market retailers, and new sharpening tools for the kitchen. We intend to continue and expand these initiatives and I am excited about the meaningful sales growth that we anticipate in the coming quarters.”

Growth Drivers

Although the loss of Cuda and Camillus in November reduces revenues, Acme is generating significant additional sales in its principal business lines. This should become more and more apparent in the coming quarters.

For example, the Company just began shipping new first aid kits to a major drug store chain in the United States. It expanded its first aid presence at a large hardware chain in the US and Canada. In addition, it started shipping Spill Magic clean-up products to a large mass market retailer in the United States. Also in the second quarter, the Westcott business began shipping new cutting tools to a major mass market retailer as well as new craft items to a prominent retailer in the hobby market. Finally, Acme just started shipping new DMT sharpeners for the kitchen to a major mass market retailer.

New Equipment & Automation

Next to expanding its distribution, the Company has been making significant investments in new equipment and automation to drive its manufacturing and distribution costs lower.

At its Med-Nap facility in Brooksville, Florida, for example, Acme is adding a new machine to expand its production of semi-solid solutions, such as hand sanitizers, antibiotic wipes and so forth. The total cost of the machine is about $850,000, but the products can both be used in Acme’s own first aid kits, as well as sold to third parties.

Also in the first aid area, a new clean room will come online in July. This will allow the automation of the boxing of lens wipes and alcohol prep pads. The machine is close to a one million dollar investment, but is expected to generate cost savings of about $400,000 to $500,000 annually.

Again in first aid, Acme will be taking delivery of a new machine in November that will automate filling first aid kits. To the Company’s knowledge, this is a first in the industry, and could as such be a game changer in the market. The cost of the machine is estimated to be around $700,000 with annual savings amounting to that same number.

At the Spill Magic plant in Smyrna, Tennessee an $800,000 investment was recently completed to automate the packaging of the material that goes into the Spill Magic products. Savings are already being generated from this new equipment.

Finally, at the Company’s largest distribution center in Rocky Mount, North Carolina high-density racking are being installed, which are expected to increase capacity and lower the cost of distribution. The work is expected to be completed by the fourth quarter of 2024.

First Quarter financials and Balance Sheet

SG&A expenses for the first quarter of 2024 were $14.8 million or 33% of net sales compared with $14.1 million or 31% of net sales for the same period of 2023. Interest expense for the first quarter of 2024 was $440,000 compared to $900,000 in the first quarter of 2023. The decrease was due to lower average debt of approximately $28 million.

	First Quarter Ended March 31
Amounts in $000’s	2024	2023
Net Sales	44,956	45,838
Cost of Goods Sold	27,560	29,557
S, G & A Expenses	14,838	14,093
Income From Operations	2,558	2,188
Interest Expense	476	919
Other Income (Expense)	(44)	(23)
Pre-Tax Income	2,159	1,309
Income Tax Expense (Benefit)	523	319
Net Income	1,636	990
Shares Outstanding – Diluted	4,213	3,541
Earnings Per Diluted Share	0.39	0.28
Selected income statement data for the quarters ending March 31, 2024 and March 31, 2023. Source: Company Press Release

The gross margin was 38.7% in the first quarter of 2024 versus 35.5% in the first quarter of 2023. The higher gross margin was mainly due to the productivity improvement initiatives that began in Q4 of 2022 and lower inbound freight costs.

Noteworthy is the higher number of diluted shares compared with last year. This is due to employee stock options that are in the money at the moment. The intention of the Company is to purchase as many as possible of the options that employees decide to exercise, so that the share count will again be reduced to previous levels.

	First Quarter Ended March 31
Amounts in $000’s	2024	2023
Cash and Cash Equivalents	2,443	2,764
Accounts Receivable	32,966	32,972
Inventories	56,887	58,488
Total Current Assets	98,406	99,185
Property and Equipment	28,860	26,397
Total Assets	159,381	157,468
Accounts Payable	7,907	10,597
Other Current Liabilities	11,931	11,816
Total Current Liabilities	21,861	24,034
Long Term Debt	23,294	40,135
Total Liabilities	60,289	74,352
Total Stockholder Equity	99,092	80,117
Selected balance sheet data for the periods ended March 31, 2024 and March 31, 2023. Source: Company Press Release

The Company’s bank debt less cash on March 31, 2024 was $31.5 million compared to $48.4 million on March 31, 2023. During the twelve-month period ended March 31, 2024, the Company paid $2.1 million in dividends on its common stock and generated approximately $5.4 million in free cash flow. Additionally, the $13 million in net proceeds from the sale of the Camillus and Cuda product lines was used to reduce debt.

Strong European Segment

Acme United reports financial information on three separate business segments: the United States (including Asia), Canada and Europe.

Exact revenues per segment for the first quarter of 2024 will be available in the Company’s 10-Q, which will be filed mid-May. However, Acme announced for each segment the percentage by which revenues increased or decreased compared with last year. Based on those numbers, we provide the following estimate.

	First Quarter Ended March 31
Amounts in $000’s	2024	2023
U.S.	38,011	38,852
Canada	3,031	3,257
Europe	3,914	3,728
Estimated sales per segment for the quarter ending March 31, 2024 (Source: Smallcaps Investment Research) and actual sales per segment for the quarter ended March 31, 2023 (Source: Company Filing)

For the first quarter of 2024, net sales in the U.S. segment declined 2% compared to the same period in 2023. Excluding Camillus and Cuda, sales for the first quarter of 2024 increased 1% compared to the first quarter of 2023.

European net sales for the first quarter of 2024 increased 5% in U.S. dollars and 4% in local currency compared to the first quarter of 2023. Excluding Camillus and Cuda, sales for the first quarter of 2024 increased 7% in local currency compared to the first quarter of 2023.

Net sales in Canada for the first quarter of 2024 decreased 7% in U.S. dollars and 6% in local currency compared to the same period in 2023. Excluding Camillus and Cuda, sales for the first quarter of 2024 increased 1% in local currency compared to the first quarter of 2023.

Conclusion

All in all, Acme United’s first quarter results were good. Revenues of the remaining brands of the Company, after the sale of Camillus and Cuda, increased. At the same time, net income saw a spectacular rise aided by the cost saving initiatives that were implemented in the second quarter of last year.

Initiatives to increase distribution and expand the product range at existing customers are being implemented. Moreover, the new equipment and automation machinery that is expected to come online in the course of this year will have a very positive impact on the bottom line.

Although Acme is not providing guidance at this moment, it is excited about continuing to drive both sales growth and profitability in the coming quarters. Smallcaps Recommendation: BUY.

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